Boston, MA 04/17/2014 (wallstreetpr) – Boston, MA 04/17/2014 (wallstreetpr) – Genworth Financial Inc (NYSE:GNW) expects to be among the companies swinging to benefit from the improving IPO market in Australia. The company is expected to offer its 40 percent stake in Genworth Australia in an IPO expected later this year – around the end of June. The transaction could fetch about $800 million in proceeds for the company.
Plans to sell a stake in the Australia business were put off on several occasions in the past, Genworth originally announced it would give up a stake in its Australia business in 2Q2012, but the date came and passed without anything to show. Later, the company pushed the IPO plans for the Australia business to early 2013, once again the date came and passed without the IPO taking place. However, with the revival of the Australian IPO market, the latest IPO announcement might come to pass as expected. The latest IPO plans seem to be possible given that the Grenworth Australia business is currently making profits.
Grenworth Australia
Genworth’s Australia business provides mortgage insurance services. The business has assets worth around A$4.01 billion or $3.7 billion in 2013.
Genworth Australia cushions mortgage lenders from the risks stemming from defaulted home loans. The robust housing market in Australia has improved business for Genworth Australia as many lenders seek its financial protection services. Also, there are few cases of loan defaulting and the company is making decent profits based on the favorable business environment.
According to a regulatory filing, Genworth Financial Inc (NYSE:GNW) expects net profit from its Australian unit to hit A$231.1 million this year, suggesting an increase of 29 percent from the previous year.
Spending IPO proceeds
The $800 million in proceeds expected from the Genworth Australia IPO will go into debt repayments. Therefore, the company will not keep any money from the IPO. But that should be good news to investors in that it will lead to improvement of the company’s balance sheet health by reducing debts.
